Closed-Form Multi-Factor Copula Models with Observation-Driven Dynamic Factor Loadings

Dynamic Factor Copula Model

The Gaussian factor copula model is the market standard model for multi-name credit derivatives. Its main drawback is that factor copula models exhibit correlation smiles when calibrating against market tranche quotes. To overcome the calibration deficiency, we introduce a multi-period factor copula model by chaining one-period factor copula models. The correlation coefficients in our model are...

Analytic Dynamic Factor Copula Model

The Gaussian factor copula model is the market standard model for multi-name credit derivatives. Its main drawback is that factor copula models exhibit correlation smiles when calibrating against market tranche quotes. To overcome the calibration deficiency, we introduce a multi-period factor copula model by chaining one-period factor copula models. The correlation coefficients in our model are...

Synthetic CDO pricing using the double normal inverse Gaussian copula with stochastic factor loadings

Factor copula models for item response data.

Factor or conditional independence models based on copulas are proposed for multivariate discrete data such as item responses. The factor copula models have interpretations of latent maxima/minima (in comparison with latent means) and can lead to more probability in the joint upper or lower tail compared with factor models based on the discretized multivariate normal distribution (or multidimen...

A closed-form universal trivariate pair-copula

Based on the trivariate pair-copula construction for the bivariate linear circular copula by Perlman and Wellner (Symmetry 3:574-99, 2011) and the Theorem of Carathéodory, which states that any valid correlation matrix is a finite convex combination of extreme correlation matrices, we generate a class of closed-form analytical 3-universal copulas. We derive explicit product and lifting copula f...